Our Mandate: Focus Our Portfolio and Utilize Our Financial Strength

Our Mandate

"More than a decade of outstanding industrial performance has given us a strong foundation on which to build," Wendell P. Weeks told investors at the company’s Annual Investor Day in New York on February 5, 2016.

Weeks explained that Corning expects to generate more than $20 billion through 2019. The company plans to invest $10 billion to grow and sustain its leadership, while also distributing more than $10 billion to shareholders. Weeks noted key actions including the recently completed $1.25 billion accelerated share repurchase and the 12.5% dividend increase as evidence that Corning was executing on that plan.

He then went on to describe Corning’s plans to focus its portfolio. "The core of what Corning does is invent, make, and sell. We create value by inventing category-defining products, using transformative manufacturing platforms, and building strong, trust-based relationships with customers who are leaders in their industries," explained Weeks. "Now we’re seeking to augment that value-creation through a more focused and cohesive portfolio that improves our probability of success, reduces the cost of innovation, and increases the barriers to entry."

How We’re Leveraging Our Market Access Platforms

How We’re Leveraging Our Market Access Platforms

Jim Clappin, President, Corning Glass Technologies

Display and Mobile Consumer Electronics

“We built market leadership in Display and realized that we could formulate a tough glass to address needs created by the disruptive advent of smartphones, using our existing fusion assets to produce the new glass. Now we will leverage our framework to increase our revenue per display by enabling the display industry to deliver even more lifelike images and advantaged form factors."

Clark Kinlin, Executive Vice President, Corning Incorporated

Optical Communications

“Over 40 years ago, we leveraged our deep knowledge of optical physics, glass science, and low-cost vapor deposition to disrupt the telecommunications industry with optical fiber. We intend to continue to deliver more disruptive innovations that really matter to our customers.”

“New approaches and new drugs create new disruptions in an adjacent market: glass vessels for the storage and delivery of injectable drugs. We believe we can apply our world-class capabilities and 100 years of leadership in the life sciences industry to invent a new kind of pharmaceutical glass vessel to pursue this opportunity.”

Marty Curran, Executive Vice President, Corning Innovation Officer

Automotive

“Corning got started in Automotive because of a disruption from the Clean Air Act. We’ve built a billion-dollar business with terrific customer relations and high returns, and we’re going to leverage that platform to address a new set of disruptions: cleaner cars, safer cars, and connected cars."

A Review of Our Capital Allocation Plan

A Review of Our Capital Allocation Plan

“Despite macro-economic headwinds in 2016, we expect meaningful growth over the next four years driven by our strong share position and lowest cost manufacturing,” Tony Tripeny, chief financial officer, said in his remarks concluding Corning’s Annual Investor Day presentations.

Tripeny noted that Corning is well positioned in its key markets and expects meaningful growth over the next four years. “We have five powerful market access platforms and have built leadership positions in our businesses,” Tripeny said. “We have world-class capabilities that we can leverage to capture attractive new opportunities, and we have a focused, cohesive portfolio that increases our return on innovation.”

In describing the key elements of Corning’s Capital Allocation Plan, Tripeny highlighted strong shareholder returns. “We are confident in our ability to generate significant operating cash flow, and we have significantly reduced our cash flow risk by expanding our hedging program,” said Tripeny. “We expect to deploy $22 to $26 billion or more in cash in our capital allocation plan over the next four years. We’re investing in a great set of opportunities that will grow our company and expand our leadership position.”

With a plan to direct more than $10 billion to shareholders over the next four years, Tripeny remarked, “Through 2019, we’ll increase our dividend by more than 50%, with our total cash returns to shareholders at roughly a 10% average annual cash yield.”

Published February 2016

Successes to Date

Utilizing Financial Strength:

We are off to a good start on our commitment to return more than $10 billion to our shareholders.

We executed a $1.25 billion accelerated stock repurchase program that completed in Jan. 2016.

In February, our board approved a 12.5% increase in our dividend.

Focusing our Portfolio:

We continue to focus our portfolio with the recent announcement of the strategic realignment of our interest in Dow Corning Corporation.

When we close this transaction, we will exchange our 50% interest in Dow Corning for 100% of the stock of a newly formed Dow Corning entity that will become a wholly owned subsidiary of Corning.

The new entity will own approximately 40% interest in Hemlock Semiconductor and approximately $4.8 billion of cash.

We believe that our ownership interest in Hemlock and the additional $4.8 billion of cash on our balance sheet creates significant value for shareholders.

The realignment will be accretive to Corning’s EPS.

The realignment is expected to be essentially tax free.

Stabilizing Display Returns and Innovating to Increase Sales per Display:

We established a long-term supply agreement with BOE and made a low-cash investment in a Gen 10.5 glass manufacturing facility adjacent to BOE’s operations.

By utilizing others’ funding, we significantly de-risked this transaction and we expect outstanding returns.

In the process, we secured 100% share of BOE’s Gen 10.5 requirements through 2028, and extended our long term supply agreement for BOE’s Gen 8.5 and below demand through 2025.

We attained favorable pricing for LCD glass in the fourth quarter.

These fourth-quarter sequential price declines were the lowest of the year and we saw the lowest annual price decline in five years for the full year 2015. Our first quarter price decline is expected to be among the smallest first quarter declines of the last five years.

These declines were achieved in spite of challenging display industry dynamics, providing evidence that we’re making significant progress on stabilizing returns in display.

We announced our first customers for Corning Iris™ Glass in 2015.

This new glass technology allows set designers to reduce TV set thickness by as much as 85%, essentially making LCD TVs as thin as a premium smart phone.

We’re excited about Iris Glass because it adds a third piece of glass to the LCD-TV stack, enabling increased glass sales on sets employing this technology.

Leveraging Automotive Market Access Platform:

We announced that Ford will use Corning® Gorilla® Glass in the iconic Ford GT.

This collaboration demonstrates what Corning does best -- applying expertise in glass and materials science to help industry leaders solve tough challenges, unleash new capabilities, and enhance experiences for customers.

The GT is the first production vehicle to use Gorilla Glass for multiple glazing applications.

This is a great example of leveraging our market access with the world’s leading automakers to pursue disruptive opportunities while utilizing existing fusion assets.

We announced a joint venture with Saint-Gobain Sekurit to develop, manufacture and sell lightweight automotive glazing solutions.

This venture allows us to move forward in the value chain beyond glass, to manufacture and sell glazing solutions with a leading producer while providing a low-cost path for us to scale Gorilla Glass-glazing solutions across the globe.

Corning will continue to produce and market Gorilla Glass to this JV and other glazers, retaining 100% ownership of the glass business.